In just a little more than two months, Russia has sold off more than 85 percent of its holdings of U.S. Treasuries. What does this mean for us here in the United States? Should the government be concerned? And what sort of impact is this going to have on various forms of investing?
The move by Russia results in more than $90 billion of treasuries being liquidated in April and May, as its holdings collapsed from approximately $100 billion to just $9 billion. Considering the escalating geopolitical tensions between the United States and Russia, it is understandable for some to wonder what sort of impact this will have on the American market.
The Trump administration imposed new sanctions on April 6 on seven of Russia’s richest men and 17 top government officials. These sanctions were meant to punish President Putin’s innermost circle for interference in the 2016 election and various other Russian aggressions that have occurred in recent years. Many of the industrialists who have been hit hardest by the sanctions have had the perception of being enriched by the authoritarian qualities of Putin’s administration.
The sanctions imposed will prevent these oligarchs from traveling to America, opening a bank account with any major bank or company in the West and doing any sort of business with such banks and many Western corporations. The sanctions also impose restrictions on foreign individuals to keep them from facilitating transactions on behalf of these Russian oligarchs.
Tensions not the only reason Russia dumped its treasury holdings
However, Russia has also had its own concerns about the American dollar for some time, even regardless of these tensions. It had reasons beyond just its current relationship with the United States to rethink its investment strategies.
Russia, like many private investors, has seen the benefits of investing in gold. It continues to accumulate gold bullion, and as the tensions between the United States and Russia deepen, the pace with which it increases its gold investments could grow even more rapid.
Russia has been buying up to a million ounces of gold in some months, and the timing with which it’s ramped up its gold purchases has come at the same time it’s been offloading its U.S. treasuries.
It’s not just Russia, though, that could see a greater reliance on gold. Tensions between the United States and China are rising as well, thanks in large part to the trade and currency wars between the two nations. China has also been starting to hasten the pace with which it’s selling its treasuries, and could accelerate even further if these trade wars deepen. China could follow Russia’s lead and start to focus more on gold investing, especially as the prices of gold are forecasted to see a significant boost in the coming years.
For more information about gold investing on an international level and how the actions of other nations can affect the U.S. treasury and the gold market, contact Gold Wealth Financial today. We look forward to working with you!
Categorised in: Gold Investing